Part II: Historical Returns and Risk. In this section, well collect data for Microsoft Corporation (MSFT) in order to calculate its historical average returns, and estimate its beta with the market. To find the data, you can type MSFT into the search bar on Yahoo Finance. This will bring you to the page about Microsofts stock. To get historical prices, click on Historical Data. Well want monthly returns, so you must adjust Frequency to Monthly and then hit Apply.

Q2.1The Close column tells us what the price was at the market close on a particular date. The adjusted close accounts for dividends and stock splits this adjustment will allow us to use the percentage change in the adjusted price as a measure of stock returns. a) What is the adjusted close price on July 31 2021 for MSFT? b) Why is this price different from the close price?

Q2.2 We saw that the stock return is equal to (P1 P0)/P0 when there are no dividends. a) What was the return of Microsoft stock from September 30 to October 31 2021? b) What was the (arithmetic) average monthly return of Microsoft from October 2011 to October 2021? c) What was the total return for Microsoft from October 2011 to October 2021?

Q2.3 The systematic risk of a stock is measured by its Beta. We get beta through a regression of the stocks return in excess of the risk free rate (ri-rf) onto the markets return in excess of the risk free rate (rm-rf). a) What is the Beta (5Y Monthly) for MSFT in Yahoo Finance? b) Calculate Beta yourself in Excel by regressing the MSFT excess returns onto the markets excess returns using monthly data spanning October 2011 to October 2021. You can get the market returns and the risk free rate each month from Kenneth Frenchs website: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/ftp/F- F_Research_Data_Factors_CSV.zip Note that you have to divide returns by 100 to get them into decimal form. Also note that since all you need is Beta, a shortcut is to use Excels slope function. If you had MSFT returns minus rf in column A and (rm-rf) in column B, you could get the beta with the function =Slope(A1:A120,B1:B120) c) Are these numbers different? If so, why? d) Is Microsoft more or less risky than an average stock on the market?